Buying from builder

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Buying from builder

 

How to Choose a Builder

 

Prospective buyers, opting to buy from a Builder, often find themselves in a quandary when having to choose the best Builder. Thus, it becomes imperative that you as a buyer assess the credibility of a particular Builder. The following cues can help you take the call:

 

  1. Verify the career graph of the Builder/Promoter, conducting a check on the background and reputation of the builder as well as the projects he has executed.
  2. Speak to as many people as possible about the Builder and the project before committing to buy. If possible, gather information from the occupants in his previous projects regarding, quality of construction, timely delivery, compliance with the Agreement, amenities made available.
  3. Find out whether the Builder has a clear title over the land. Check the history of the land on which the Builder is building. You can do a personal check or engage professional legal services to verify the title of land ownership.
  4. Get an Advocate to scrutinize the Development Agreement if the land has been acquired on an agreement with the landowner and examine the title of the land ownership.
  5. Confirm if the Builder's claim to sell is authentic and that he has the authority to sell. If he is selling on behalf of the Seller, check if he is duly authorised by a Power of Attorney, executed and authenticated before the Sub-Registrar to act on behalf of the Seller.
  6. Ask the Builder if he has obtained a 'Completion Certificate' and an 'Occupancy Certificate'. These are proof of compliance with all local municipal regulations.
  7. Check for certifications and ratings of the project from credit rating /grading agencies like the CRISIL - NAREDCO Rating. Check if the builder's firm is an ISO certified company.

 

Questions to ask a Builder:

 

If you are buying in a project under construction, you can pose questions to the Builder along the following lines:

 

  1. How many homes does he/his firm build per year?
  2. What is the typical construction time for the cycle of permit to completion?
  3. Will a construction site Manager be appointed for the job?
  4. What type of communication is he open to during the entire process - will you meet on a regular basis to review progress or can you call at any time?
  5. Does he have a construction timeline that can tell you when to expect the finished product?
  6. Within what time frame can he entertain any concerns regarding corrections you need him to make

 

Documents to Be Submitted By the Builder

 

When buying property in India from a builder, it is in the interest of the buyer to check mandatory permissions and papers with the Builder/Developer. Below is a checklist of documents to be submitted by the Builder/Promoter/Developer to the buyer during the transaction:

 

  1. Property title: It shows who the true owner of the property is and whether the title is clear and marketable or whether the property is under litigation. It also tells you whether the land is freehold or leasehold. Apart from this, it informs whether the seller has the authority to develop and sell the property and if it is free of encumbrances.

The builder should provide you with copies of the property titles but you should also look at the originals. If it's leasehold, the terms of the lease are important.

  1. No Objection Certificate: This certificate informing whether the property is free for sale is obtained from the building Society members if the flat being purchased is a resale flat in a Registered Society. This certificate is important as it helps to identify if the member has any pending dues or disputes with the society and shields you from paying his past liabilities.
  2. Letter of Registration: This is an undertaking that the Builder has secured all the required permissions from the concerned authorities to build the property that he is offering for sale.
  3. Copy of the Building Plan: This is the building plan that has been approved by the competent authorities like fire brigade, environmentalists' and other such authorities.
  4. Building Completion Certificate: This certificate is issued by Municipal Authorities showing whether the building complies with the rules of building height, distance from road, and whether it is built according to approved plans and is ready for habitation.
  5. Letter of Possession: It ensures that possession of the said building is being delivered to the purchaser on the effective date specified in the letter.
  6. Letter of Purchaser: It ensures that all the due obligations of the buyer have been fulfilled and no other liabilities remain on the buyers' part. It states that the due amount has been received and the deal is complete.
  7. Occupation Certificate: This certificate is issued when the building is ready for occupation after water, sewage and electrical connections are complete. An original copy of the Occupation Certificate by the Municipal Corporation of the locality is mandatory. It is vital in the sense that this document confirms the possession to the buyer legally; otherwise a mere handing over of the possession will stand null and void, in case a dispute arises.
  8. Allotment Letter: For a project under construction, these documents are very important as the Allotment Letter contains details regarding the agreed price, payment and construction schedule, house plans, delivery date and builder's liability in case of late completion or problems after possession.
  9. Development Agreement: This document is an agreement between the builder and the landowner and contains details regarding the terms and conditions on which the landowner has permitted development of his property. This document acquires great importance during a transaction for a property under construction.
  10. A Title report: This report contains the history of the title over the last thirty years. It states whether the property is unencumbered and has a clear and marketable title and is free of any litigation issues.
  11. Copy of Insurance Cover if already taken.
  12. Additionally, the purchaser can ask the Builder to furnish the addresses, nature of the organisation / persons to be constituted, to which title is to be passed on in writing. Such organisation may be a Co-operative Society or private limited company etc.

 

Stamp Duty and Registration:

 

Besides this, such Builder/Promoter will have to execute an Agreement for Sale with the purchaser, duly stamped and registered under the Indian Registration Act, 1908. The buyer needs to register within a maximum period of 4 months from the date of execution of Sales Agreement at the Sub-registrar Office appointed by the State Government, under the relevant Registration Act.

 

Contents of the Sale Agreement:

 

The Agreement must contain the liability of the Promoter/Builder to construct the building according to the plans and specifications approved by the local authority. It should also contain possession date, price to be paid by the purchaser and the intervals at which the installments towards the full payment are to be made specifying the stage of construction, the precise nature of the body to be constituted of the persons who would take the flats, details regarding the common areas and facilities specifying the percentage of undivided interest in the common areas and facilities pertaining to the apartment agreed to be sold, a statement of the use for which the apartment is intended.

 

Tips to buy from a Builder

 

Listed below are tips that a buyer should keep in mind while purchasing property from a Builder:

 

  1. Make sure all approvals are in place.
  2. Ensure that you don't miss out any point in the Sale Contract. Seek professional help if needed. Cover the consequences of late completion of the project and the Builder's liability in it.
  3. When buying a new project, check the property layout plan. It will contain details of the exact area of the property, its location, the built-up area, the carpet area, the elevation, and the flowerbed area if any.
  4. Ask the Builder to disclose the description of the materials to be used in the construction of the building and the nature of fittings, amenities (including the provision for one or more lifts) that are to be provided.
  5. Check if the property has all supplies like authorized power, electricity and water connection.
  6. Try and personally visit the construction site, if possible, to check the quality of the material and workmanship employed by the Builder.
  7. If buying a flat on a high-rise building, ensure that the floor that you are going to buy is authorized.
  8. Ensure that the property is fire-insured and protected against loss due to other natural calamities.
  9. Match the specifications like measurements written on the 'Agreement to Sell' with the actual measurements of the building/flat. Check if there are discrepancies between what is being promised in the brochures and what has actually materialized.
  10. If you have to pay the Builder for a common meter till such time that you are allotted a separate one, ensure that you collect a receipt for the payment. Also, ensure that all previous dues are cleared.
  11. After completion of construction, ask for all applicable documents from the Builder, as given below:
  1. Letter of Possession
  2. Letter of 'No Objection'
  1. Certificates of Completion and Occupation certificate.
  2. In the sanctioned plan, make sure that the project has been fully approved by the concerned authorities of the Government.
  3. Check for the building bye-laws as applicable in that area and ensure that the Builder is not violating any norms of front setback, side setbacks, height etc. as laid down by the concerned authorities.
  4. Check if Urban Land Ceiling NOC (if applicable) has been obtained.
  5. NOC from Water and Electricity Authorities are also required to be obtained as also NOC from lift authorities.

 

About the title deeds

 

  1. Has the builder shown to the flat purchaser relevant documents regarding title of plot on which the building is proposed to be constructed ?
  2. Is the title certificate from a reputed solicitor / advocate attached to the agreement ?
  3. Whether all information regarding the encumbrances is brought out clearly or is there vague reference to the encumbrances.
  4. Is the extract of property register card or other revenue record of the of the land / plot on which the flats are going to be constructed attached to the agreement for sale ?

 

Inspection of Plans / Drawings

 

  1. Has the builder got the approval of plans / drawings from the Municipal Authorities / Local Authority ?
  2. Has the builders shown to the flat purchaser the approved plans / drawings to the flat purchaser ?
  3. Has the builder shown to the flat purchaser the copy of commencement certificate (C.C. ) and Intimation of disapproval (I.O.D.) ?

 

Area, number of flats etc.

 

  1. Is the serial number of flat, floor at which it is located, name of building / wing distinctly indicated in the body of agreement ?
  2. Is the carpet area / built-up area of the flat distinctly indicated in the body of agreement ?
  3. Is the dimensioned floor plan marking the subject flat annexed to the agreement ?
  4. Is the plan referred to in (iii) above duly signed by the builder at the time of execution of the agreement ?

 

Amenities / Specifications

 

  1. Has the builder annexed with the agreement a schedule of amenities / specifications (type of construction, flooring, doors, windows, sanitary and water supply, electrical fittings ) ?
  2. Is the scale agreement in accordance with the conditions laid down by the Urban Land (Ceilings & Regulations) Authorities ?
  3. Nature, extent and description of common areas and facilities etc.
  4. Does the agreement for sale describe distinctly the common areas and facilities (such as entrance hall, foyer of building, compound wall etc.) and limited common areas facilities (landing in front of stair case etc.), percentage / interest of flat purchaser in common areas and limited common areas / facilities ?

 

Possession

  1. Is the date by which possession of the flat is given to given specified in the agreement for sale?
  2. Is there provision in the agreement for refund of the amounts due by the builder alongwith simple interest @ 9% per annum from the date of receipt by builder till the date of refund in the event of failure of the builder to give possession of the flat by stipulated date or mutually agreed extended date ?

 

Mode of payment

 

  1. Is the mode of payment of installments distinctly mentioned in the agreement for sale?
  2. Permission under Urban Land Ceiling and Regulation Act 1976.
  3. Has the builder obtained permission of the competent authority under Urban Land Ceiling and Regulation Act 1976 for developing the land / plot on which proposed building is to be constructed ?
  4. Is the sale agreement in accordance with the conditions laid down by the Urban Land (Ceiling & Regulation) Authorities ?

 

Outgoings

 

  1. Has the builder mentioned in the agreement the amount payable by the flat purchaser on taking possession in respect of legal charges, share money, application entrance fee of society, charges for information and registration of the society and proportionate share of taxes and other charges ?

 

Stamp duty and registration

 

  1. Is the flat purchaser aware about the quantum of stamp duty payable by him at the time of execution of agreement ?
  2. Is the flat purchaser aware that the registration of agreement in respect of flat purchased from the builder is compulsory ?
  3. Is the flat purchaser aware of the amount of registration charges payable by him.
  4. Is the flat purchaser aware of the fact that the time limit for registering agreement for sale is four months from the date of its execution?

 

Form No.37-1

 

  1. Whether filing of form no.37-1 under chapter XX-C of Income Tax is to be filled in respect of transaction of the subject flat.
  2. If the answer to i) above is in the affirmative, is the flat purchaser informed about the procedure for filing form no.37-1 ?
  3. Is the flat purchaser aware of the implications of filing form no.37-1 ?
  1. Verify the career graph of the Builder/Promoter, conducting a check on the background and reputation of the builder as well as the projects he has executed.
  2. Speak to as many people as possible about the Builder and the project before committing to buy. If possible, gather information from the occupants in his previous projects regarding, quality of construction, timely delivery, compliance with the Agreement, amenities made available.
  3. Find out whether the Builder has a clear title over the land. Check the history of the land on which the Builder is building. You can do a personal check or engage professional legal services to verify the title of land ownership.
  4. Get an Advocate to scrutinize the Development Agreement if the land has been acquired on an agreement with the landowner and examine the title of the land ownership.
  5. Confirm if the Builder's claim to sell is authentic and that he has the authority to sell. If he is selling on behalf of the Seller, check if he is duly authorised by a Power of Attorney, executed and authenticated before the Sub-Registrar to act on behalf of the Seller.
  6. Ask the Builder if he has obtained a 'Completion Certificate' and an 'Occupancy Certificate'. These are proof of compliance with all local municipal regulations.
  7. Check for certifications and ratings of the project from credit rating /grading agencies like the CRISIL - NAREDCO Rating. Check if the builder's firm is an ISO certified company.

 

Questions to ask a Builder:

If you are buying in a project under construction, you can pose questions to the Builder along the following lines:

 

  1. How many homes does he/his firm build per year?
  2. What is the typical construction time for the cycle of permit to completion?
  3. Will a construction site Manager be appointed for the job?
  4. What type of communication is he open to during the entire process - will you meet on a regular basis to review progress or can you call at any time?
  5. Does he have a construction timeline that can tell you when to expect the finished product?
  6. Within what time frame can he entertain any concerns regarding corrections you need him to make?

 

Buying Property from a builder in India

 

Today, builders have registered their strong presence in Indian real estate market. Buying property from a builder takes away much of the stress that a buyer faces otherwise. It affords the buyer the luxury of moving into a fully completed home or office. A Builder can be a person or an enterprise that takes on the responsibility of scouting for land, getting permits, buying land, registering it, constructing a building and finally selling it within a fixed timeframe.

 

Builders' standing in the Real Estate market:

 

CREDAI (Confederation of Real Estate Developer's Associations of India) is the apex body of the organized Real Estate Developers/Builders across India. It represents the Developers/Builders across India and communicates with the Government authorities for the formulation of proactive policies for their profession.

 

  1. CREDAI encourages the Developers/Builders to increase their efficiency in the development/construction activities by introducing the latest technology.
  2. Member Builders/Developers have to abide by its ethical code of conduct, which is self-imposed and mandatory, in order to bring integrity and transparency to their role in Real Estate development.

 

Many Builders operating in Real Estate India are members of the Builders Association of India, one of the objectives of which is to address the issues that Builders come across from time to time.

 

Strategies that can work to your advantage:

 

Builders today, are engaged in the construction of major housing and commercial projects across the country. An awareness of when to buy makes buying from a Builder an attractive proposition for those thinking of buying real estate in India as it entails the below benefits:

 

  1. Buying in a slow market: At times, a builder has surplus inventory and would like to sell off at reduced prices. You as a buyer can benefit from it, defying the market trend.
  2. Buying early in the development stage: Buying during the early stages of construction, at times can assure you a much lower price as the earlier you buy, lesser are the chances of your facing the impact of appreciated property values. Moreover, there is an increased chance of negotiation from your end.
  3. You can also go for a pre-launch residential project where the Builder raises capital for the project by taking advance bookings from interested buyers after getting the required building permits, but before beginning construction.
  4. Buying the last home in the locality: As the finance structure of the construction industry affords selling the last home in the locality even at a price below the going rate, the benefit is ultimately passed on to the buyer. Also, the builder wants to sell it readily and quickly.
  5. Sub-leasing to builder: It is a commercially viable option to buy unit models as they are subject to many levels of upgradation and the best of craftsmanship is employed to attract buyers. If you are contemplating buying a house in India, you have the option to buy one complete with decorated furnishings.
  6. Buying when the property will be part of a Society: If the Builder has plans of helping form a co-operative society, this may be advantageous for you as members are protected under the Co-operative Housing Society bye-laws. Alternatively, if the builder is going to write the property in favour of the Society at a future date, it will serve your interests to buy such property.
  7. If you decide to buy from a Builder, make it a point to have a lawyer by your side to seal the deal with success. You can browse through the tips we offer for striking the best deal as well as precautions that should be taken while doing so. Also included is a list of documents that you should seek from a builder during and after your transaction.